Shopping for and proudly owning a franchise are distinctive experiences that require diligence, endurance, and dedication. If you happen to’re fascinated by getting into the world of franchising and have a number of questions, you aren’t alone.
There are lots of potential pitfalls when embarking on any new enterprise, so you will need to do your analysis. That is no much less true in case you are a potential franchisee.
The Most Generally Requested Questions By a Potential Franchisee
As a franchise regulation agency, we obtain many questions. Listed below are solutions to the seven we come throughout most ceaselessly.
Q: What’s the “due diligence” course of?
In franchising, “due diligence” refers back to the strategy of gathering the data it’s essential make an knowledgeable choice a few potential franchise funding. There are a number of steps concerned within the due diligence course of, from visiting the franchisor’s headquarters to talking with present and former franchisees.
Q: What do I have to learn about my franchise settlement?
Identical to another enterprise contract, it’s vitally necessary that you simply totally perceive all of the phrases and situations earlier than you signal.
Together with the franchisor’s operations handbook, your franchise settlement will decide what you possibly can (and might’t) count on out of your franchisor. It additionally defines what your obligations are as a franchisee.
The franchise settlement may also comprise provisions for what occurs when you have a disagreement together with your franchisor. Potential franchisees have to take the time to rigorously assessment their franchise agreements. They need to discuss to a lawyer to search out out if any provisions should be negotiated.
Q: How a lot help can I count on to obtain from my franchisor?
It relies upon, however in all probability not as a lot as you’d count on.
Let’s return to the franchise settlement. What does the settlement say in regards to the franchisor’s ongoing obligations? Most likely not a lot.
Whereas franchisors exert vital management over their franchisees, they sometimes search to restrict their very own obligations as a lot as potential.
Q: Will I obtain an unique territory?
That relies on the phrases of the franchise settlement. Some franchisors supply unique territories. Some supply “protected” territories. In some programs, franchisees don’t obtain any territorial safety in any respect.
Q: What occurs if my franchise is unsuccessful?
If you happen to battle to succeed as a franchisee and attain the purpose the place you might be fascinated by closing the enterprise, you have to rigorously weigh your choices.
In lots of instances, franchisors can declare “misplaced future royalties” from franchisees whose companies fail. As well as, you’ll possible be topic to restrictive non-competition and non-solicitation covenants after your franchise relationship ends.
Q: What occurs if my franchise is profitable and I wish to renew on the finish of the preliminary time period?
Most franchise agreements embrace renewal provisions that permit profitable franchisees to proceed past their preliminary time period.
Nonetheless, franchisors can nonetheless exert vital management over the renewal course of. This could embrace forcing franchisees to undertake new system requirements and signal a brand new (and completely different) franchise settlement. There are often tight time home windows for exercising renewal rights as nicely.
Franchisees who intend to resume should sometimes begin the method nicely prematurely.
Q: What are a few of the commonest points franchisees have with their franchisors?
Franchisor-franchisee disputes are widespread. Some franchise programs are recognized for having persistent points with franchisee satisfaction.
From royalty and promoting payment calculations to pricey updates and necessary buying necessities, nearly all points of the franchise mannequin have a minimum of some potential to result in arbitration or litigation.
If you happen to cease to consider it, nobody ever indicators a franchise settlement pondering it’s going to result in costly and aggravating authorized hassles. Nonetheless, franchise agreements have the ability to make your life depressing, so it is smart to train an acceptable stage of warning previous to signing.